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05
NUFARM LIMITED HALF YEAR REPORT 2014
Major product segments
Crop protection
Nufarm’s crop protection business
generated an increase of 21 per cent
in sales in the first half of the previous
year and accounted for 95 per cent
of group revenues ($1.08 billion
versus $894 million). These revenues
generated an average gross margin
of 25.8 per cent (2013 first half:
26.3 per cent).
Herbicide sales were $711 million,
21 per cent up on the previous
period. These sales generated an
average gross margin of 25 per cent
(2013 first half: 25 per cent) and
represented 66 per cent of total
crop protection sales.
While hot and dry conditions
in Australia limited demand for
herbicides, sales in South America
and in some North American
segments were strong. Glyphosate
sales volumes were similar to the first
half period of the previous year, but
raw material costs and selling prices
were higher leading to a larger sales
value. There was a slight improvement
in glyphosate margins. Herbicide
sales into the pasture segment in
Brazil were higher, as were dicamba
sales in the United States.
Insecticide sales were also strongly
up on the first half of the previous
year ($171 million versus $113 million)
and were 16 per cent of total segment
sales. These sales generated an
average gross margin of 32 per cent,
a slight improvement on the margin
achieved in 2013.
Insect pressure in the South American
soy crop was extremely high and
Nufarm was well positioned to take
advantage of the stronger demand.
First half fungicide sales were slightly
lower at $100 million (2013 first half:
$107 million) and generated a 27 per
cent gross margin. These sales
represented nine per cent of all crop
protection sales, a lower proportion
than in the previous half year.
While fungicide sales in Europe were
strong, lower disease pressure in both
South America and Australia resulted
in a lower level of sales from this
product segment.
Seed technologies
The company’s seed technologies
segment includes sales of seeds and
seed treatment chemistry. Segment
sales in the first half were $54 million,
an increase of 35 per cent on the
previous period. Underlying EBIT was
$3.3 million, compared to $4.4 million
in the first half of 2013.
Seed technology sales generated an
average margin of 49 per cent, lower
than the 54 per cent recorded in 2013.
A change in supply and selling
arrangements relating to Nuseed’s
servicing of the China confectionary
sunflower segment has resulted
in a reduced percentage margin
as the company moved away from
a royalty-based model. The new
arrangements lower risk, with sales
and profit continuing to grow as
Nuseed consolidates its position
in this important segment.
Early season hybrid canola sales
in Australia were very strong, with
Nuseed strengthening its market
leadership in this segment. This
contrasted with lower sales of
sunflower and sorghum seeds due
to drought impacts in Australia.
Seed treatment sales were also higher,
supported by an expanded product
portfolio and the growth of the custom
blending business based in Chicago.
This facility was commissioned in
January of the previous year.
The company continued to make
further investments in strengthening
the seed technologies platform, with
higher R&D and product development
spending. Two innovation centres were
opened, in Woodlands (US) and
Horsham (Australia). A number of
regional management appointments
were made to support growth in the
seed treatment segment, and a
development and production unit
was established at the company’s
Wyke facility in the United Kingdom.
Balance sheet management
and financing
Net debt at the end of the first half
was $1.02 billion (net debt at 31
January 2013: $743 million). Average
net debt for the first half was $908
million, compared to $644 million in
the first half of 2013. The elevated net
debt reflected funding requirements
for higher levels of working capital
in the period.
REPORT TO SHAREHOLDERS CONTINUED
SIX MONTHS ENDED 31 JANUARY 2014
Sales by product segment
Total $1,138.2 million
Fungicides
Insecticides
Herbicides
Seed technologies*
Other
62%
9%
15%
5%
9%
Other includes equipment, adjuvants, PGRs and industrial.
* Seed technologies includes seed plus seed treatment.